Economic Impact of Hosting the Olympics

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Table of Contents

Introduction
Economic implications
Conclusion
References

Introduction

The Olympic Games debate has been ongoing for a long time. Many economists have argued that the games should be abolished because of their negative impact on the economies of host countries (Black, 2012).

This is evident from the increasing financial requirements of subsequent games. Other factors that warrant the discontinuation of Olympic Games include terrorism threats and negative impact on social systems of host countries.

Security agencies encounter many difficulties in their efforts to prevent possible attacks by terrorists during the games. This leads to more expenses and inconveniences. The main reason for the proposed abolishment is negative economic implications.

These include low profits that cannot cover the costs of inputs, increased financial requirements in every event, and availability of better means of spending the money such as offering financial aid to third world countries (Guttman, 2002).

Olympic Games should be discontinued because they waste the money and resources of host countries, expose participants and observers to terrorism threats, and negatively affect the social structure of host countries.

Economic implications

High costs

First, inputs for Olympic Games increase with each event. This is evident from an analysis of the expenditure of Athens, Beijing, Sydney, and London games. For example, the security expenses for the 2012 Olympics rose to $ 1.6 billion from the initial projected cost of $361 million.

According to financial data obtained from past Olympics, the event has continued to present more financial constraints to host countries. In 2004, Athens spent US$ 15 billion to finance the games while in 2000 Sydney spent $23 billion.

In 2008, Beijing spent US$43 billion while in 2012 London used US$ 19 billion (Madden and Giesecke, 2012). The high expenditures have been linked to economic decline in several countries.

For example, financial analysts have attributed the debt crisis experienced by the Greek government to the high costs of the 2004 Olympic Games (Madden and Giesecke, 2012). This is a good enough reason for the discontinuation of the games.

Security is one of the major concerns of the Olympic Games, and which is very costly. Statistics reveal that the cost of security at the Olympics has been on the rise.

Sydney spent $ 180 million, Athens spent $ 1.5 billion, Beijing spent approximately $ 6.5 billion, and London spent $ 1.6 billion (Black, 2012). Costs balloon during subsequent games because each city tries to outdo other cities and thus ends up spending more.

Projections for subsequent Olympics are higher, and many cities do not fight for a chance to host the games.

Benefits reaped from the Olympics are only visible in the long-term and are very few. However, they are costly and detrimental to host countries’ economies.

For example, facilities constructed before the commencement of the games remain unused for most of the year after completion of the games in many countries. Beijing is an example.

The Bird’s nest stadium was constructed solely for purposes of the Olympic Games and cost the Chinese government $423 million (Morris, 2012). However, it is rarely used now. This forced the event’s organizers to find other uses for the stadium.

Also, the stadium needs maintenance, which leads to unnecessary expenses. The government uses taxpayers’ money to pay for maintenance costs since the stadium is rarely used. It does not earn sufficient income to cater for maintenance expenses.

After the Olympics, it showed prospects of high financial gains because many tourists visited China to see the stadium, which had then become a tourist attraction. However, since 2008, the number of tourists has dropped tremendously.

Reports reveal that the stadium consumes over $13 million dollars in maintenance costs (Morris, 2012).

Other facilities constructed before the games include the “water cube” aquatic center, the National Center for Performing Arts, and the CCTV headquarters (O’Hara, 2009). Most of them struggled financially to maintain their operations after the games.

After hosting the 2000 Olympics, Sydney suffered great financial loses. It spent $ 6 billion financings the games, which was three times its initial estimate. Facilities that constructed for the Olympics operate in losses today (Morris, 2012).

On the other hand, many sports facilities are in poor condition and are rarely used. The poor financial status of Athens city further aggravated the problem.

Low profits

Profits made during the Olympics are so low that they cannot cover the cost of hosting the games. For example, the 2004 Athens Olympics made loses of US $ 15 billion after spending more than $ 10 billion to finance the games (Itano, 2008)).

Beijing made $ 146 million profit while London went even. A large portion of the money used to plan the Olympic Games comes from sponsors.

Therefore, revenues generated from the events mostly benefit the games’ planning committees other than the economy of the host country (Perryman, 2012).

Companies engage in massive advertisement activities hoping that the games will help to increase sales during the entire period of the games.

Whenever that happens, companies increase their revenues, and the government earns more in taxes. However, in most cases, the games only increase the sales of a few companies and many make massive losses.

Low profits and high expenses have characterized many Olympics since 1984. However, some have made considerable amounts of profits.

For example, since 1984, Olympic games that made profits include Los Angeles Olympics that earned US$250 million, Seoul Olympics that earned US $300 million, Barcelona Olympics that earned the US $5 million, and Atlanta Olympics that earned the US $10 million (Perryman, 2012).

In 2008, China earned more than the US $240 million from selling rights to television stations that aired the event (Xinhua, 2009). Many games have resulted in great loses. For example, the 2004 Athens Olympics resulted in high loses that affected the economy of the city adversely.

The 1976 Montreal Olympic Games incurred great losses, and it took the country over 20 years to emerge from the economic crisis that resulted after the games (Preuss, 2004).

Alternative uses of the money

Money used to host the Olympics could be used in other ways such as poverty alleviation in third world countries. A lot of money is used to construct new stadiums, running tracks, and other amenities associated with the games.

Research has revealed that after the games, most of these facilities remain unused. Constructing facilities whose intended purposes fail to cover the construction costs are unnecessary. Africa has many countries that experience hunger and drought for most of the year.

This money could be donated to such countries to help them solve problems that are experienced every year. Also, the money could be used to fund HIV and AIDS, and cancer research projects, or eradication of diseases such as malaria (Liu, 2012). Many diseases need vaccines.

However, due to lack of funding, they have not yet been developed. The money could be used to fund such projects. People living in poor countries experience a plethora of problems that include poor housing facilities, malnutrition, diseases, and hunger.

The money could be used to offer aid to people in poor countries to enable them to improve their lifestyles (Liu, 2012).

Diseases are the major cause of the high mortality rate in Africa. Monetary aid could help many African countries provide quality health care services to people and help to eradicate diseases.

Conclusion

The Olympic Games debate has been ongoing for a long time with many people advocating for its discontinuation. Opponents advocate for abolishment because of the negative impact of the games on the economy of host countries.

This is evident from the increasing financial requirements of subsequent Olympic Games. Many countries have suffered great losses after the games failed to rake in profits. For example, Sydney suffered great financial losses after the 2000 Olympics.

It spent $ 6 billion financings the games, which was three times its initial estimate. Facilities constructed for use during the Olympics operate in losses today. A large portion of the money used to host the Olympic Games comes from sponsors.

Therefore, revenues generated from the event mostly benefit the games’ planning committee other than the economy of the host country. This results in great losses. Money spent in the Olympics could be used in different beneficial ways.

It could be used to fund HIV / AIDS and cancer research projects or eradication of diseases such as malaria. Also, it could be used to improve the lifestyles of people living in poor countries.

References

Black, M. (2012). Winners’ Curse? The Economics of Hosting the Olympic Games.

Guttman, A. (2002). The Olympics: A History of Modern Games. Chicago: University of Illinois.

Itano, N. (2008). As Olympic Glow Fades, Athens Questions $15 billion Cost.

Liu, M. (2012). Architectural White Elephants: Beijing, London, and the Post-Olympics Curse.

Madden, J., and Giesecke, J. (2012). Hosting the Olympics: Cash Cow or Money Pit?

Morris, D. (2012). The Economic Impact of Hosting the Olympics. Web.

O’Hara, C. (2009). Few Profits, Many Cost Overruns Expected for Olympic Hosts. Web.

Perryman, M. (2012). Do the Olympics Boost the Economy? Studies Show that the Impact is Likely Negative. Web.

Preuss, H. (2004). The Economics of Staging the Olympics: A Comparison of the Games 1972-1978. New York: Edward Elgar Publishing.

Xinhua, L. (2009). Beijing Olympics’ Profit Exceeds 1b Yuan. Web.

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